The state of New York has filed lawsuits against Coinbase and Gemini, alleging that their prediction market offerings, which include sports, entertainment, and election-related contracts, are essentially unlicensed gambling products. According to the lawsuits, the way these companies advertise their prediction markets and act as bookmakers on their platforms suggests they are facilitating gambling.
The New York Attorney General's office has described the behavior of these platforms as allowing users to place bets, with each contract being akin to a wager. Furthermore, the suits argue that these platforms permit individuals between the ages of 18 and 21 to place bets, which contradicts New York's law prohibiting anyone under 21 from gambling on mobile apps. The lawsuit against Coinbase states, 'In essence, what the respondent offers through its platform is gambling: it enables a bettor to stake money on the outcome of a chance event or a future event beyond the bettor's control, with the understanding that they will receive something of value if a certain outcome occurs.' New York is not the first state to take legal action against providers of prediction markets for their sports and entertainment products. Other states, including Nevada and Washington, have filed similar lawsuits, arguing that at least sports-related bets should be considered gambling rather than federally regulated swaps.
This issue is currently before multiple appeals courts and is likely to be heard by the U.S. Supreme Court. Paul Grewal, Coinbase's Chief Legal Officer, responded on social media, stating that 'prediction markets are federally regulated national exchanges' and that Coinbase would advocate for federal oversight.
Gemini declined to comment on the matter. Commodity Futures Trading Commission Chairman Mike Selig has argued that prediction markets, including those related to sports, fall under his agency's exclusive jurisdiction.
The CFTC has taken legal action against several states to prevent them from charging prediction market providers and has joined another case in Nevada to defend these providers. Kalshi, a major prediction market provider, was not named in the lawsuits. However, the company had previously sued the New York State Gaming Commission, seeking a federal court ruling that state gambling laws do not apply to its platform.
This case is ongoing. New York State Attorney General Letitia James released a statement calling both Gemini and Coinbase's products 'illegal gambling operations.' She emphasized, 'Gambling by any other name is still gambling and is subject to regulation under our state laws and Constitution.'